By Ryan Hanlon

RV dealers form reinsurance companies to capture underwriting profits on the protection products you sell in the F&I office. That entails taking on the risk inherent to selling insurable products: Theoretically, your claims could exceed your premiums and wipe out your profits, which is why premium reserves are determined by actuarial data based on expired risk.

The above scenario is, of course, extremely unlikely, given the amount of risk that has expired on past business to date. But every product generates some claims, and every underwriter carefully tracks their “earned loss ratio,” calculated by dividing paid claims by earned premiums. For example, if you write $250,000 in premium with $90,000 of it earned so far, and have paid $45,000 in claims to date, your earned loss ratio comes out to 0.5, or 50%.

High loss ratios are a red flag. Your products may not be priced right. Your inspection and reconditioning processes may be flawed. Your sales team may be telling customers who notice parts in need of repair or replacement to wait until their service contract goes into effect, then bring the unit back. (It happens!)

For all these reasons, it is critical to appoint an “A-person” to track, adjudicate and report on your claims. Here are the five most common questions we hear from RV dealers about the A-person and their unique role:

1. What will my A-person do?

Your A-person will have the ability to get involved in claims, to whatever extent you deem appropriate, to ensure your customers get the repairs they need while minimizing your loss ratios.

In short, your A-person will be empowered to make the right decisions for you and your reinsurance company when it comes to managing claim costs. They need to know real money is on the line, and that it’s the dealer’s money, not some invisible third party’s.

2. Who should my A-person be?

Dealers typically ask their general manager, CFO or service director to be their A-person. I work with one dealer whose agent serves as his A-person.

One could argue authorizing your service director to make claims decisions is like asking a fox to guard your henhouse. But if their responsibilities and your goals are clear, it shouldn’t be a problem.

3. Can I be my own A-person?

Yes. But if you are running a large dealership or multiple rooftops, you may prefer to delegate this responsibility.

4. Does my A-person need to know how my reinsurance company is performing?

You should meet with a representative from your provider on a quarterly basis to review your reinsurance company’s performance. These “cession” meetings are held to discuss a personal financial asset, so most dealers choose to keep them private. But it’s really up to you.

5. How do I know if my A-person is doing a good job?

You will grade your A-person’s performance on their ability to make good decisions, create and enforce sensible policies and keep you informed. If you need to know how many claims over $1,000 are filed in the first 60 days or how many claims over $1,500 are performed by an outside repair facility, they should be able to tell you. If this sounds excessively granular, it is, but that’s how underwriting profits are maximized.

Ultimately, your A-person succeeds when you succeed: Your loss ratios are reasonable, your customers are happy and safe and your reinsurance company is firing on all cylinders.

In case you missed it, check out our entry on tieback clauses, another important tool available to RV dealers on reinsurance programs. And as always, if we can answer any questions about your program or reinsurance in general, please don’t hesitate to contact us today.

Ryan Hanlon is a managing director for Portfolio, a leading provider of reinsurance and F&I programs for RV dealers, and a 16-year industry veteran. For more information or to schedule a confidential consultation with a Portfolio reinsurance expert, email inquiry@portfolioco.com today.